"Bonds, a smart pre indicator ..."

There are many ways that traders try to pre-empt a market move, many of which are based on indicators that are based on the same underlying information, so confirmation is often quite difficult. In addition indicators like moving averages, oscillators and so forth are really lagging indicators and by the time these techniques kick in your trade is often under water.

So are there any leading indicators worth their salt ?

Both the indicators I like to use are drawn from the futures markets. The first one that I like to use is the DOW Futures (/YM) and the second are the30 year Bond Futures (/ZB)

Example :

On December 1st, in the pre market the DOW futures were up 145 points going into the open whilst the Bond futures were showing a significant drop. Over the subsequent trading day the DOW rocketed up 249 points and the Bonds dropped significantly.

DOW Furture 1st December 2010:

Bond Futures - 1st December 2010 :

The subsequent trade action on the 2nd of December was that the DOW went up 249 points :

Clearly the message here is that the futures markets lead the equity and options markets and that each of these products are an excellent leading indicator.

Cheers